Journal of International Business Studies, 1–27
& 2010 Academy of International Business All rights reserved 0047-2506
www.jibs.net
First- and second-order effects of consumers’
institutional logics on firm–consumer
relationships: A cross-market
comparative analysis
Jagdip Singh1,
Patrick Lentz2 and
Edwin J Nijssen3
1
Weatherhead School of Management, Case
Western Reserve University, Cleveland, USA;
2
Department of Marketing, University of
Dortmund, Dortmund, Germany; 3Department
of Technology Management, Eindhoven
University of Technology, Eindhoven, the
Netherlands
Correspondence: EJ Nijssen, Department of
Technology Management, Eindhoven
University of Technology, PO Box 513, 5600
MB Eindhoven, the Netherlands.
Tel: þ 31 (0)40 2472170;
Fax: þ 31 (0)40 2468054;
E-mail: e.j.nijssen@tue.nl
Abstract
Consumers’ conceptions of a market’s institutional logic affect mechanisms
of firm–consumer relationships, but are generally neglected in comparative
studies of international marketing. This study bridges institutional and relationship marketing theories to examine two questions: do consumers hold
meaningful mental models of a market’s institutional logics, and do these
mental models explain differentiated patterns of market relationships across
international contexts? Building on contract-relational duality, we develop
a market-level construct for capturing consumers’ socially constructed mental
models for the institutional logics of market action. We theorize that differences
in consumers’ institutional logics will influence both their evaluation of a firm’s
capabilities (first-order effect) and the degree to which they reward a firm
through their commitment (second-order effect). These bridging predictions
are tested using data from the insurance industry across three international
markets. Our results show that the German insurance market is located in the
relatively high contracts–low relational quadrant, whereas the US and Dutch
markets are both located in the relatively low contracts – high relational
quadrant. Our results also suggest that consumer commitment conforms to a
principle of alignment such that commitment accrues to providers who align
their capabilities with consumers’ prevalent institutional logics of the market,
and penalizes those who deviate from it.
Journal of International Business Studies (2010) 1–27. doi:10.1057/jibs.2009.101
Keywords: institutional theory; relationship marketing; cross-cultural analysis; comparative analysis
Received: 22 August 2008
Revised: 29 August 2009
Accepted: 3 September 2009
Online publication date: 11 February 2010
INTRODUCTION
Understanding similarities and differences in mechanisms of
firm–consumer relationships is of fundamental interest for international marketing researchers and practitioners alike. Researchers
seek differentiating ‘‘patterns of exchange’’ that characterize
comparative marketing systems, while practitioners drive for
‘‘discretionary decision-making’’ that exploit disparate patterns
for strategic advantages in global markets (Iyer, 1997: 552).
Two dominant, but distinct, streams of research have emerged to
illuminate mechanisms of firm–consumer relationships across
markets. The institutional perspective emphasizes the embedded
Consumers’ institutional logics
Jagdip Singh et al
2
view of market exchanges, and theorizes the role of
‘‘constitutive norms’’ of the marketplace (Grewal &
Dharwadkar, 2002; Scott, 2001). In viewing institutional fields as social structures with isomorphic
force, this perspective acknowledges but subordinates the role of strategic action in individual firm–
consumer relationships. By contrast, relationship
marketing theory focuses on ongoing market
exchanges to identify firms’ capabilities critical to
earning consumers’ commitment (Morgan & Hunt,
1994; Sirdeshmukh, Singh, & Sabol, 2002). Consistent with its emphasis on managerial agency, this
approach accepts cross-market variability, but marginalizes the role of the larger context in which
exchanges develop and evolve. Both perspectives
can claim support within their literatures (Kostova
& Roth, 2002; Palmatier, Dant, Grewal, & Evans,
2006). However, few studies have attempted to
bridge these differing perspectives. Thus the concerns raised over a decade ago by Iyer (1997: 553)
that theories of international marketing ‘‘have y
failed to deal adequately with y the fundamental
nature of market [exchange] relations’’ and limit
our understanding of ‘‘buyer behavior under generalized [institutional] contexts’’ continue to persist
today.
We aim to bridge the institutional and relationship marketing perspectives, and make three specific contributions. First, we emphasize and develop
consumers’ conception of a market’s institutional
environment. Thus far, research grounded in institutional theory has tended to focus either on
managerial conceptions of institutional environments (Porac, Thomas, & Baden-Fuller, 1989;
Prahalad & Bettis, 1986) or on inter-firm relationships (business-to-business, B2B) (Grewal & Dharwadkar, 2002; Heide & Wathne, 2006), largely
ignoring the consumers’ perspective in businessto-customer (B2C) relationships (Brief & Bazerman,
2003). Our study addresses this imbalance. We
utilize institutional theory ideas of contractrelational duality to conceptualize consumers’
shared and socially constructed mental models for
the institutional ‘‘logics’’ of the marketplace. We
thus offer a more socialized view of ongoing firm–
consumer relationships. By focusing on the consumer perspective, we affirm that consumers are
critical market actors who shape and sustain
ongoing market relationships through their commitment to maintain (or terminate) exchanges.
Second, we theorize how consumers’ institutional
logics impact on mechanisms of consumer commitment in ongoing relationships with individual
Journal of International Business Studies
firms across international markets. We refer to
predictions from our theorizing as bridging hypotheses. We anticipate influences both on consumers’ evaluation of a firm’s capabilities and on
the degree to which they reward a firm through
their commitment, which we refer to as first- and
second-order effects respectively. Past research has
focused on describing rather than theorizing and
explaining variability across international markets.
For instance, Wulf, Odekerken-Schröder, and Iacobucci (2001) examine the mechanisms of relationship commitment across three international
markets (Belgium, the Netherlands, and the US),
but posit no a priori hypotheses for the variability in
modeled relationships. In their analysis, these
authors find significant variability for almost every
path in their model across the three markets (their
Table 4: 43). Our study addresses this gap, and
develops a priori institutional-theory-based predictions to account for the variability in exchange
relationships across market contexts.
Third, we operationalize consumers’ conceptions
of institutional logics, theorized as a market-level
construct – consumers’ institutional logics of market
action (CILMA) – and examine its potential to
capture variability in institutional environments of
the insurance industry for three contrasting markets
(Germany, the Netherlands, and the US). We also
examine the incremental contribution of the CILMA construct to explain variability in exchange-level
mechanisms of relationship marketing (i.e., firm–
consumer relationships) while remaining sensitive
to alternative explanations rooted in cultural differences. We specifically control for cultural variability
due to masculinity and uncertainty avoidance –
dimensions most closely related to contract-relational duality.
The paper is organized as follows. First, we review
the institutional perspective to establish that consumers, like managers, are also likely to develop
a shared mental model of a market’s institutional
logics. Thereafter, we develop and define the
CILMA construct to capture consumers’ conceptions of institutional logics, and outline its similarities and differences with respect to extant cultural
constructs. Next, we review the relationship marketing perspective on ongoing firm–consumer
relationships, and theorize the incremental contribution of the CILMA construct by developing
bridging hypotheses of first- and second-order
effects. Following this, we report on the empirical
study involving the insurance market in three
nations, organized in two subsections: the first
Consumers’ institutional logics
Jagdip Singh et al
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relating to CILMA’s construct validity, and the
second to testing the bridging hypotheses. Finally,
we discuss our findings, and derive the theoretical
and managerial implications.
INSTITUTIONAL PERSPECTIVE ON
CONSUMERS’ LOGICS OF MARKET EXCHANGES
Institutional theory, generally viewed as one of the
leading perspectives for analysis of market action
and evolution, draws on three central premises
(Heugens & Lander, 2009; Lawrence & Suddaby,
2006). First, institutional theorists emphasize the
role of institutional fields as established and
prevalent social rules and norms structuring social
interactions among market actors with economic
objectives, thereby rejecting the atomistic and
‘‘undersocialized’’ view of neoclassical economics
and rational choice theorists (Heugens & Lander,
2009; Hodgson, 2006). Second, the institutional
view conceives ‘‘logics’’ as socially constructed
mental models that groups of individuals hold as
shared cognitions of socialized routines for action.
As Scott (2001: 57) noted, ‘‘compliance occurs y
[as] routines are followed because they are taken for
granted as ‘the way we do these things’.’’ Third,
institutional fields reproduce and sustain themselves through instruments of socialization, including word of mouth, stories, and artifacts that
engage and socialize new members, and allow
environmental changes to be incorporated into
pre-existing routines and patterns (Lawrence &
Suddaby, 2006).
Shared logics are ‘‘essential’’ to facilitate communication, order interactions, and promote learning
among market actors (Denzau & North, 1994: 4–5;
March & Olsen, 1998; Scott, 2001). Most markets
are too complex for an individual to independently
learn how they work, or what routines to enact for
successful market exchanges (Mantzavinos, North,
& Shariq, 2004). Social interactions and socialization processes help individuals learn efficiently
from the collective knowledge of institutional
logics, and store it as a shared mental model that
guides their market actions. Mental models are
neither static over time nor deterministic in shaping the actions of market actors. Rather, these
models are dynamically updated as individuals
learn through feedback from market exchanges,
and their normative influence waxes and wanes
as they compete with other cultural, social, and
economic forces influencing individual action.
Denzau and North (1994: 5) note that understanding shared mental models is the ‘‘single most
important step’’ for replacing the ‘‘black box of
rationality assumption used in economics and
rational choice models.’’
Past research has generally neglected consumers’
mental models of a market’s institutional logics.
This possibly reflects a misconception that communication across consumers is too diffused,
fragmented and infrequent to support meaningful
mental models. However, sufficient evidence exists
to suggest that consumers (1) are motivated
to engage in social learning and construct such
models, and (2) use them to navigate their action
for productive market exchanges (Mantzavinos
et al., 2004). For example, research on lay theories
suggests that, especially in uncertain environments, consumers actively learn from self, and
vicariously from others’ market experiences to
develop and share naı̈ve theories (Molden &
Dweck, 2006). Moreover, modern technologies are
rapidly enabling forums for social learning. This
includes online communities, consumer blogs and
forums, word of mouth through texting, e-mail and
phone, and public sources that reflect and frame
consumers’ market experiences and expectations.
Such shared experiences and learning promote and
explain the mental models that consumers collectively develop and share.
The CILMA Construct: Conceptualization and
Dimensions
We conceptualize CILMA as consumers’ shared
mental model for the institutional field of marketplace exchanges. Following Denzau and North
(1994), we posit that these logics are typically
organized around (1) categories that classify different types of market exchanges, and (2) concepts
that characterize distinctive features of market
exchanges. We develop each of these ideas in turn.
Denzau and North (1994) note that categories are
key architectural features of individuals’ mental
models. Categories define boundaries separating
entities that differ in the institutional logics
governing their social structure. Within a category,
entities are thought to be structured with common
institutional logics. Across categories, the structuring logics are likely to be differentiated. Categories
provide efficiency in negotiating market exchanges
by providing a common set of expectations for a
host of entities that are categorized similarly. For
instance, insurance providers in a given cultural
context (e.g., Germany) may be categorized
together, indicating that market exchanges with
them are characterized by common expectations
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Consumers’ institutional logics
Jagdip Singh et al
4
regarding service interactions, pricing, product, and
related features. How these common expectations
arise is probably a combination of cultural-historical factors relating to the nation (e.g., regulatory
governance in Germany) and the institutions
unique to the industry (e.g., professional governance of the insurance industry). In other words,
each industry is likely to be organized around
distinct technologies and processes, governed by
largely distinct regulatory codes, and to carry a
historical and cultural trace of negotiations among
marketers and consumers.
It is therefore inappropriate to presume that
institutional logics are common across different
industries within a nation (e.g., automobiles and
insurance in the US) or for similar industries across
different nations (e.g., insurance in the US and
Germany). Several studies indicate that the variability across industries within nations is substantial,
and comparable to cross-national variability (Dyer
& Chu, 2000; Kostova & Roth, 2002; Makhija &
Stewart, 2002), suggesting industry as a reasonable
basis for categorization.
Moreover, building on Denzau and North’s (1994)
notion of concepts as basic blocks of mental models,
we posit that, within a category, institutional logics
will be characterized by different combinations of a
few elementary concepts. While prototypical concepts offer theoretical clarity owing to their elementary focus, in practice no market is likely to be
completely defined by a single prototypical concept.
Markets are complex contexts of exchanges that
require a multi-conceptual space to specify their
distinct and sometimes competing logics (Jackson &
Deeg, 2008).
Within the institutional literature, two prototypical concepts that have received the most attention relate to March’s distinction between the logics
of ‘‘instrumentalism’’ and ‘‘appropriateness’’ (Kostova & Roth, 2002; Makhija & Stewart, 2002),
which, in turn, have their roots in the duality of
contracts and relational forms of governance
(Macaulay, 1963). These logics provide contrasting
or alternative mechanisms for reducing risk and
uncertainty in market exchanges, thereby promoting an orderly structure for the consummation of
exchanges and sustenance of ongoing relationships
(Macaulay, 1963; March & Olsen, 1998).
As per the logic of instrumentalism, market
exchanges are structured by institutions that
emphasize the rule of formal contracts in dictating the terms of firm–consumer relationships
(Macaulay, 1963; March & Olsen, 1998). Because
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the monitoring and enforcing of contracts are
critical to the instrumentality of market exchanges,
the role of contracts is often vested in agencies that
transcend firms and consumers involved in market
exchanges. Typically federal, state, or regulatory
agencies fill this institutional role (Griffiths &
Zammuto, 2005). For instance, in some nations,
regulatory agencies provide commercial firms with
a framework of mandatory contracts for different
levels of products and services (e.g., heating oil,
insurance) to consumers.
Contractually structured market exchanges are
intended to ensure that consumers have access to
the products and services they need, and safeguard
their interests from the opportunistic intentions of
firms to restrict consumer welfare or renege on
promised products or services. Contracts need not
always be mandated by regulatory agencies. Firms,
either individually or through collective action
(e.g., associations), can offer formal contracts that
detail terms of exchange with sufficient depth and
clarity to mitigate the risk and uncertainty of
market exchanges. Such contracts, however, are
unlikely to have pragmatic utility unless they are
evaluated to be fair and enforceable by a neutral
third party with superseding power.
Few agencies can match the state and federally
supported institutions as a credible third party. In
a nation such as Germany, for instance, where
formal contracts are historically preferred, the
insurance market is governed by Bundesanstalt für
Finanz-dienstleistungsaufsicht (BaFin), a federal
agency for the supervision of financial services.
The BaFin acts on federal laws that include detailed
legislation for insurance companies and its products/services, and monitors firms for financial
solvency and compliance with the official guidelines (see the Appendix for additional details).
An alternative mechanism for structuring market
exchanges is the logic of appropriateness (March &
Olsen, 1998), where relational codes of conduct are
institutionalized to emphasize trust and reciprocity
among market actors as a basis for reducing risk
and uncertainty (Macaulay, 1963). The notion of
trust, central to the relational codes exemplified by
appropriateness logics, is market actors’ (e.g., consumers’) confident expectation that other actors
involved in market exchanges (e.g., firms) will curb
opportunism and fulfill exchange promises. When
trust is one-sided, market exchanges may not be
sustainable. When trust is reciprocated, such that
trusted actors are committed to mutually satisfying
relationships, relational codes dominate market
Consumers’ institutional logics
Jagdip Singh et al
5
exchanges and become institutionalized through
scripts and routines for long-term relationships.
Formal institutional mechanisms of governance,
including regulatory agencies and written contracts, are avoided recognizing that such mechanisms may hinder the development of trust between
market actors (Griffiths & Zammuto, 2005).
The relational logics have received much attention as principles of relationship marketing in B2C
(in addition to B2B) markets (Garbarino & Johnson,
1999; Morgan & Hunt, 1994; Sirdeshmukh et al.,
2002). Relationship marketing asserts that markets
based on relational codes are self-reinforcing and
efficient because they obviate the need for costly
monitoring and legal enforcement of contractual
obligations. Relational codes commit market actors
to finding mutually acceptable solutions to problems that permit the relationship to continue over
time (Dyer & Chu, 2000; Heide & Wathne, 2006).
For example, in the US where relationship
marketing has taken hold, state and federal agencies set only minimum thresholds for insurance
products and services. Service and price levels vary
widely across insurance providers (www.iii.org) to
reflect different levels of customer relationships.
Consumer blogs emphasize the importance of
selecting a reputable company for a long-term
relationship to secure a comprehensive coverage
of insurance needs (www.insurance.ca.gov). Consistent with this, professional associations such
as the American Council of Life Insurers (ACLI)
petition for limiting regulatory oversight, relying
instead on self-regulation to stimulate competitiveness and emphasize relational modes of exchange
(see the Appendix for additional details).
Although we used the US and German insurance
markets as examples that evidence relational and
contractual logics respectively, we emphasize that,
in practice, institutional contexts of any market,
including the US and Germany, are likely to evidence both logics to different degrees (March &
Olsen, 1998). For example, while the contracts
logic is compatible with the historical evolution
of the German insurance industry, the industry
was deregulated in 1994 to promote competition,
reduce regulation, and favor relational orientation
between providers and consumers. Likewise, in the
US, where the insurance industry was deregulated
at least a decade earlier, formal regulatory mechanisms are assuming a greater role, with growing
evidence of fraudulent and opportunistic activities
of insurance providers (see the Appendix for additional details).
CILMA and Culture: Points of Distinction and
Similarities
The proposed CILMA construct is distinct from
cultural constructs available in the literature,
although it does share some common elements.
Hofstede (1993) defines culture as the collective
programming of the mind that distinguishes the
members of one category of people from those of
another. Culture is composed of certain values,
which shape behavior as well as one’s perception
of the world. Examining this definition in light of
the proposed conceptualization of the CILMA
construct suggests three points of distinction.
First, cultural constructs reflect higher-order (i.e.,
more general) programming of mental models
shared by all members of a cultural community,
and are ostensibly relevant across all situations.
For instance, uncertainty avoidance is a cultural
construct that reflects the ‘‘degree to which people
in a country [generally] prefer structured over
unstructured situations’’ (Hofstede, 1993: 90). By
contrast, CILMA is a lower-order (i.e., less general)
logic of the mental model that is specific to market
exchanges. Our theorizing of CILMA focuses specifically on the logics governing the social structure of exchanges among market actors. The
contract-relational duality is therefore unlikely to
be relevant for non-exchange situations such as
interpersonal and family relationships. In this
sense, CILMA is proximal to the phenomenon of
market exchanges, whereas cultural constructs
are located distally at a higher level of generality.
Second, the programming implied by cultural
constructs is ‘‘hardwired’’ as central to the identity
of its members (Hofstede, 1993). For instance,
German people are reportedly higher in uncertainty avoidance than those residing in the US,
indicating that to be an American (German) is to
have a general preference for less (more) structured
experiences. By contrast, the CILMA construct is
‘‘soft-wired’’ in the sense that mental models
develop with accumulating experience of market
exchanges in a particular industry/market. Because
the CILMA construct is not moored to either
individual or collective identities, it is more labile
and responsive to active constructions through
social mechanisms by market actors.
Third, the focus on values vs norms or expectations is another source of difference. The cultural
constructs tap into underlying values that define
and characterize members of a cultural group.
Germans are thought to prefer structure, not simply
because it enhances predictability and efficiency,
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Consumers’ institutional logics
Jagdip Singh et al
6
but because formal order and organization are
valued and aspired attributes by its members.
Likewise, Americans are thought to value unpredictability, and disdain formal structures. This is
not because they would rather be inefficient and
disorganized, but in spite of it.
By contrast, the CILMA construct’s theoretical
focus is on norms for market exchanges and,
as a result, is more closely related to expectations
that describe market actors’ behaviors in market
exchanges. Unlike values, such norms and behavioral expectations are more easily observable and
identifiable across markets because they are more
closely tied to behavior.
It is also useful, however, to recognize some
similarities between cultural constructs and CILMA.
The CILMA construct is posited to set contextual
contingencies for the behaviors of market actors.
Similarly, cultural constructs are thought to bound
the behaviors of members by what Poortinga (1992:
10) has noted as ‘‘constraints that limit the
behavioral repertoire available to members.’’ Given
this similarity, it is tempting to view cultural constructs and CILMA simply as competing mechanisms of influence. This would be inappropriate,
since CILMA is incompletely nested within the
higher-order cultural constructs. Cultural factors
play a role, along with a host of other categoryspecific factors, in shaping the institutional logics
conceptualized as CILMA. It is appropriate to ask,
for instance, whether the contract-relational duality of CILMA goes beyond the structured-unstructured duality represented by the uncertainty
avoidance construct. Also, unlike cultural constructs, CILMA is proximal to market exchanges,
and is conceptualized with lower-order specificity
to enhance its relevance for the study of institutional influence on relationship marketing mechanisms. We develop hypotheses for this influence
next.
INSTITUTIONAL LOGICS AND FIRM–
CONSUMER RELATIONSHIPS: FRAMEWORK
AND HYPOTHESES
Relationship Marketing and Firm–consumer
Relationships
Relationship marketing has emerged as ‘‘one of
the dominant mantras in business strategy circles’’
for understanding consumer–firm relationships
(Palmatier et al., 2006: 136), and has been successfully used for comparative international marketing
analysis (Wulf et al., 2001). Relationship marketing
Journal of International Business Studies
is defined as ‘‘all marketing activities directed
toward establishing and maintaining successful
relational exchanges’’ with a firm’s customers
(Morgan & Hunt, 1994: 22). It shifts the marketers’ frame from a transactional to a relationship
mode, and asserts a customer-centric orientation
(R. L. Oliver, 1997). A customer-centric orientation
brings into focus the critical role of sensing the
evolving needs and preferences of customers, and
making strategic decisions that enhance a firm’s
ability to gain customer commitment (Zeithaml,
Berry, & Parasuraman, 1996). Committed customers are motivated to maintain an ongoing
relationship with a specific firm through future
purchase intentions, increased share of wallet, and
positive word of mouth. A portfolio of committed
consumers ensures a revenue stream essential for
the sustainability of a firm’s capabilities. Sensing
and strategizing for sustained customer commitment are therefore key managerial responsibilities
for effective management of firm–consumer relationships.
A significant amount of work, in both national
and international contexts, supports relationship
marketing mechanisms for gaining customer commitment (Palmatier et al., 2006). Although several
competing theories exist (Wulf et al., 2001), most
studies appear to converge around three key
mechanisms for securing customer commitment:
(1) transactional satisfaction;
(2) social trust; and
(3) economic value (to be discussed).
With a few exceptions, relationship marketing
studies that examine contextual influences, such
as in comparative international marketing analysis, tend to describe rather than theorize and
explain variability across contexts (Nijssen, Singh,
Sirdeshmukh, & Holzmüller, 2003). As noted, Wulf
et al. (2001) examine the mechanisms of relationship quality and commitment across three international markets, and find significant variability
across almost every modeled path for the three markets (see their Table 4: 43). Consequently, there is
sufficient evidence to suggest that exchange
mechanisms of relationship marketing vary significantly across market contexts, but there is little
theorizing to predict and explain this variability.
We develop institutional-theory-based explanations for hypothesizing the differentiated patterns
of firm–consumer exchange mechanisms across
market contexts. Specifically, we use the CILMA
construct to explicate how consumers’ conceptions
Consumers’ institutional logics
Jagdip Singh et al
7
of a market’s institutional logics influence mechanisms leading to their decisions to maintain ongoing
relationships with individual firms. However, we
first outline a model that represents the extant
relationship marketing literature, and does not
consider the role of market context (referred to as
the ‘‘baseline’’ model). We do not posit formal
hypotheses for these well-established effects.
A Baseline Model of Firm–consumer Relationships
The central block in Figure 1 displays the baseline
model. The independent variables represent managerial agency for investing in mechanisms of
transactional satisfaction, social trust (firm and
frontline employee-based trust), and economic
value. Each mechanism is evaluated by consumers
and may subsequently be reciprocated with consumer commitment. Because these mechanisms are
well established in the literature, we provide only a
brief review.
Consumers’ evaluation of transactional satisfaction involves the degree of fulfillment of some
need, desire, goal, or other pleasurable end-state
in a specific exchange encounter with the firm
(R. L. Oliver, 1997). Consumers form expectations
of future market transactions based on prior
experiences and knowledge (e.g., what do I expect
to get?) and, when these expectations are fulfilled
or positively confirmed (did I get what I expected,
or more?), consumers perceive their exchange
to be satisfactory, thereby building commitment
(R. L. Oliver, 1997).
The social trust mechanism involves consumers’
evaluation that a firm can be relied upon to deliver
on its promises and curb opportunism in future
exchanges (Morgan & Hunt, 1994). Substantial
evidence suggests that consumers reward trusted
firms with their commitment (Palmatier et al.,
2006). Factors resulting in positive trust evaluations include initiating and building long-term
consumer relationships, making idiosyncratic
investments that foster consumer trust and resolve
conflicts, and developing frontline capabilities
that place consumers’ interests above the firm’s
Consumers’ Institutional Logics of Market Action (CILMA)
(shared and socially constructed mental model for the social structure of marketplace exchanges)
Transaction
satisfaction
First-order Effects
Firm
trust
First-order effects
First-order effects
First-order effects
Second-order effects
Ongoing firm–consumer relationships
Consumer
commitment
Frontline
employee
trust
Economic
value
Figure 1 First- and second-order effects of consumers’ institutional logics of market action on mechanisms of ongoing firm–
consumer relationships.
Journal of International Business Studies
Consumers’ institutional logics
Jagdip Singh et al
8
short-term revenue goals (Palmatier et al., 2006;
Sirdeshmukh et al., 2002). Consistent with recent
work, frontline employee and firm trust are distinguished.
Finally, consumers evaluate economic value by
considering the benefits enjoyed relative to the
costs incurred in ongoing relationships. Several
studies stress the importance of understanding
economic value from the consumers’ perspective
(Brief & Bazerman, 2003), and firms are increasingly focusing their efforts toward enhancing
tangible and/or intangible consumer benefits without concomitant increases in costs (Sirdeshmukh
et al., 2002).
Overall, relationship marketing theory posits that
each of the preceding three mechanisms directly
affects consumer commitment. However, these
effects are not necessarily linear. Recent studies
report curvilinear effects such that, for instance in
relational exchanges, trust has a ‘‘motivator’’ effect
(increasing exponentially) whereas transactional
satisfaction has a ‘‘hygiene’’ effect (decreasing
exponentially or leveling off). Only the effect of
economic value is reported to be linear (Agustin &
Singh, 2005). Thus, in the baseline model, we
include curvilinear effects of satisfaction and both
trust mechanisms.
Influence of CILMAs on Firm–consumer
Relationships
A key insight from institutional theory is the nontrivial influence of institutional logics on individual behavior (Scott, 2001). Such institutional
logics are ‘‘rules of procedures that actors employ
flexibly and reflexively to assure themselves and
those around them that their behavior is reasonable’’ (DiMaggio & Powell, 1991: 20).
We draw on this insight to hypothesize that
consumers are likely to weight exchange mechanisms more favorably if they are aligned with the
dominant institutional logic prevailing in the
market (referred to as the principle of alignment).
Two specific hypotheses are developed relating to
CILMA’s influence on: (1) the mean levels of
consumers’ satisfaction, trust, value, and commitment evaluations for the individual firm with
whom they maintain ongoing relationships (‘‘firstorder effects’’ in Figure 1); and (2) moderating the
effect of satisfaction and trust evaluations on
consumers’ commitment (indicated by ‘‘secondorder effects’’ in Figure 1). We discuss each in turn.
In positing first-order effects, we assert that
consumers’ normative expectations in market
Journal of International Business Studies
relationships (e.g., what should I expect?) are
shaped by the mental model of the market’s
institutional field. For instance, when CILMA is
contracts-dominated, consumers expect firms to
invest in transactional capabilities. Quality norms,
certifications, and other product guarantees mandated by formal bodies in this institutional field
mitigate the need for relational trust, and shift
the focus toward transactional satisfaction. Kollock
(1994) showed that when product quality is assured, or where ‘‘the experimenter served as a regulatory agency to insure the terms of the exchange,’’
relational trust between exchange parties was less
vital, and transactional factors assumed greater
importance.
By contrast, in relational-dominated CILMA,
consumers are likely to expect firms to invest in
capabilities that emphasize relational processes and
build trust (Agustin & Singh, 2005). The limited
monitoring and safeguarding against opportunistic
behavior of individual firms is likely to favor
consumers’ motivation to develop close relationships with their providers.
Moreover, we expect higher levels of consumer
commitment in a relational CILMA. Consumer
commitment is a forward-looking indicator of consumers’ intentions to maintain ongoing relationships (Dyer & Chu, 2000). In contracts-dominated
CILMA, substitutability among providers is likely
to be high because the greater emphasis on institutional standards for quality norms, certifications,
and product guarantees mitigates the need for
consumer commitment toward any single provider. By contrast, consumers in relational CILMA
are more likely to rely on close relationships to
police opportunistic firm behaviors, and to avoid
costs of locating trustworthy providers. Thus we
posit:
Hypothesis 1: Compared with contracts-dominated CILMA, relational-dominated CILMA will
be associated with (a) lower levels of transactional
satisfaction, and (b) higher levels of trust and
consumer commitment.
In support of second-order effects, the principle
of alignment also identifies conditions under
which consumers will reciprocate a firm’s investments with their commitment. When a market
is characterized by relational-dominated CILMA,
consumers are likely to weight the relational
capabilities of exchanges more favorably (Nijssen
et al., 2003). Research on how consumers process
Consumers’ institutional logics
Jagdip Singh et al
9
information about markets (e.g., brands) and
categorize it to cope with market decisions effectively (e.g., brand choice) provides support for this
assertion (Bettman & Sujan, 1987). As per categorization research, consumers differentiate among
brands on key attribute(s) that are relevant and
salient for a given market. Also, once brands are
differentiated, consumers are more sensitive to
variations along the attributes used for categorization. This increased sensitivity is found to enhance
the weighting of the categorizing attributes in
consumer decisions (Bettman & Sujan, 1987).
Building on the preceding research, we expect
that consumers in relational CILMA will be likely
to differentiate among firms based on the social
trust mechanism. This is because a relationaldominated CILMA primes consumers to attend to
the relational aspects of market exchange, making
social trust both relevant and salient. As a result,
consumers are expected to be more sensitive to
evaluations of relational trust, and to weight it
more favorably in making commitment decisions.
Also, the ‘‘motivator’’ role of trust is expected
to be amplified in relational CILMA (Agustin &
Singh, 2005). Thus the influence of trust is likely to
follow an exponentially increasing pattern in
relational CILMA, consistent with the motivator
hypothesis.
Similarly, when the institutional logic emphasizes
contracts, consumers are primed to attend to the
transactional qualities of market relationships,
including the degree to which firms meet or exceed
expectations when making commitment judgments.
As a result, transactional satisfaction assumes a more
salient and relevant role in differentiating firms,
while relational considerations of trust are given
less significance. Differentiation on the basis of
transactional capabilities is therefore likely to
bolster consumers’ sensitivity to evaluations of
exchange satisfaction in making commitment decisions. This implies that the influence of transaction
satisfaction on consumer commitment is relatively
stronger and more salient in contracts-dominated
CILMA. Consistent with this, we expect that the
influence of satisfaction in relational-dominated
contexts is likely to follow an exponentially
decreasing pattern to reflect its relatively weak
and hygiene effect in this context. Thus:
Hypothesis 2a: Compared with contractsdominated CILMA, relational-dominated CILMA
will be associated with a relatively stronger effect
of trust on commitment.
Hypothesis 2b: Compared with relationaldominated CILMA, contracts-dominated CILMA
will be associated with a relatively stronger
effect of satisfaction on commitment.
Based on the universal importance of value, we
do not expect the economic mechanism to be
sensitive to variability in CILMA. To consumers,
economic value represents a superordinate goal in
market relationships (Sirdeshmukh et al., 2002).
Firms lacking capabilities for providing consumerperceived value will be less likely to gain consumer
commitment, regardless of differences in institutional logics. Consequently, while we expect economic value to significantly influence consumer
commitment, we do not expect consumers’ CILMA
to have second-order effects on this influence.
Thus:
Hypothesis 3: Consumers’ perceived economic
value will have a significant effect on consumer
commitment that is invariant to CILMA.
RESEARCH DESIGN AND METHOD
Study Context
We selected a single industry and three contrasting
national contexts to examine empirically the
CILMA construct and the posited hypotheses. By
focusing on a single industry across markets, we
aimed to provide variation in institutional fields
while controlling for confounding effects due to
cross-industry variation. Because services are an
increasingly important aspect of leading economies, we chose the insurance industry, particularly
life, home, and automobile insurance services.
Health insurance was not included because the
selection of a healthcare provider is often at the
discretion of an employer.
We used secondary data sources to identify the
German, US, and Dutch markets as potential
contexts that offered contrasting institutional
logics for the insurance industry as well as feasibility of collecting data in a systematic and
coordinated manner (to be discussed). Our selection of these markets does not constitute an a priori
specification or predetermination of their location
in the institutional logics space. The secondary
data are intended only to ensure that we expect
variability across these markets for the institutional
logics of the insurance industry.
As stated earlier, the German insurance market
is governed by BaFin, a federal agency for the
Journal of International Business Studies
Consumers’ institutional logics
Jagdip Singh et al
10
supervision of financial services. The BaFin acts
on federal laws that include detailed legislation
for insurance companies (VAG or VersicherungsAufsichts-Gesetz), products/services (VVG or Versicherungs-Vertrags-Gesetz), monitoring financial
solvency of firms, and imposing penalties, including voiding a firm’s license in the case of nonadherence or violations.
In the US, state and federal agencies set only
minimum thresholds for insurance products and
services. Service and price levels vary widely across
insurance providers (www.iii.org), and consumer
blogs emphasize the importance of selecting a
reputable company (www.insurance.ca.gov). Consistent with this, professional associations such
as the ACLI petition for limiting regulatory oversight and promote self-regulation to stimulate
competitiveness and emphasize relational modes
of exchange.
Finally, the Dutch insurance market is rather
complex, with two institutions sharing governance
responsibilities, the De Nederlandsche Bank and
Autoriteit Financiële Markten (AFM). While clearly
demarcated monitoring and standard-setting
responsibilities have yet to emerge, some progress
has been made, with the Dutch government
shifting responsibility for consumer affairs to AFM
(for further details see the Appendix).
Next, materials from Consumer Reports-type
agencies, as well as typical contracts for home and
auto insurance in the three markets, were collected.
Consistent with Faems, Janssens, Madhok, and van
Looy (2008), who examined the length of contractual documents to infer the degree to which contracts are important in alliance governance, we
used similar procedures to infer the importance
of contracts in individual insurance markets. Our
analysis indicated that typical contracts for home
and auto insurance were relatively longer in
Germany, and substantially shorter in the US
(19–30% less) and the Netherlands (30–70% less)
respectively (see the Appendix).
In accord with this trend, consumer organizations in Germany (e.g., Stiftung Warentest) focus
more on price comparisons. By contrast, leading consumer organizations in the US urge consumers to consider relational issues when selecting
an insurance provider, noting that ‘‘it may not be
wise to jump to an unknown company to save
a few dollars’’ (www.ohioinsurance.gov, Shopper’s
Guide, 7). Suggestions on how to select a provider are also present in the Netherlands (e.g.,
Consuwijzer) but the information is usually general
Journal of International Business Studies
and not specific. In sum, the secondary data suggest
that the three countries selected offer a reasonable
possibility of obtaining variability in institutional
logics for the insurance industry.
Sampling Procedures
The CILMA construct and the firm–consumer
exchange constructs are conceptualized at the
group and individual levels respectively. This
allows data to be collected for each level either
from two different groups of consumers or from
the same consumer. Obtaining data from the
same consumer about the institutional logics and
exchange constructs is likely to introduce samesource bias in testing hypotheses that relate these
two levels.
For instance, if the institutional logics construct
were measured first, it is likely that the respondents’ sensitivity to contractual and relational
issues would bleed into their evaluations of
exchange relationships. Likewise, if the institutional logics were measured subsequent to
exchange relationships, respondents might have
carried their evaluative frames over to assessments
of contractual and relational logics. Thus we
preferred data from two distinct samples, with each
focusing on one level of data, and subsequently
to combine them with the notion that the institutional data capture contextual characteristics
that are commonly shared across individuals that
belong to that context.
We refer to these two data sets as: (1) institutional
logics data, that is, the data set drawn from a random sample of key informants to evaluate CILMA;
and (2) firm–consumer relationships data, that is, the
data set drawn from a random sample of consumers
to capture measures of their ongoing relationships
with insurers. Sampling plans and field procedures
for both data collections were coordinated across
countries to achieve equivalence in data collection,
measurement, survey instrument, and data handling (Easterby-Smith & Malina, 1999).
Institutional logics data. Random samples of key
informants were selected from commercial lists of
consumers, using selection criteria to ensure
experience with insurance products. The surveys
were administered in two waves, with an overall
survey period covering 4–5 weeks. Customary
incentives were used to increase the response rate.
In all, 1000 consumers in each of the three
countries were selected as key informants for
Consumers’ institutional logics
Jagdip Singh et al
11
participation. Informants were asked to self-select
for participation if they met the following criteria:
(1) primary household responsibility for insurance
needs;
(2) at least 35 years old; and
(3) recent contact with insurance agent/company
to report problems and/or discuss changes to a
policy.
The numbers of qualified responses obtained
were: 227 in Germany, 128 in the US, and 139 in
the Netherlands. On average, about two-thirds
of all respondents were male, with an average age
of about 50 years, and 80% married. The majority
of the respondents had a college degree, and
an average yearly gross income of about $95,000
in the US and $50,000 in the other two countries.
Firm–consumer relationships data. Random samples
of consumers were selected from independent
commercial lists, avoiding overlaps with those
selected for institutional logics data. The surveys
were administered in a total of three waves spread
out over a 7–10-week survey period. Several
measures were taken to secure reasonable response
rates (e.g., reminder cards, follow-up calls, and
lottery drawing), allowing for small variations in
field methods per country. In all, 4000 consumers in
Germany, 3900 in the US, and 2850 in the
Netherlands were selected for participation. Respondents were qualified to complete the survey if
they identified an insurance company for which
they had at least (1) one auto, home or life
insurance policy, and (2) one contact in the last 12
months with a frontline employee regarding their
policy. Non-qualifying respondents were asked to
return their surveys unfilled.
Using information from responses of non-qualifying persons and follow up phone calls, a qualifying
rate was estimated at 47%, 55%, and 45% in
Germany, the US, and the Netherlands, respectively. A qualifying rate indicates the percentage of
respondents in a random sample of population who
are likely to meet the selection criteria established
for the study (i.e., at least one policy and interpersonal contact). Based on these qualifying rates
and the number of responses – 504 in Germany, 365
in the US, and 316 in the Netherlands – the
estimated response rates (corrected for qualifying
rates) were 26%, 21%, and 28% for Germany, the
US, and the Netherlands respectively.
Table 1 summarizes the demographic characteristics of the respondents, and shows that while
the Dutch and US data indicate a more even
distribution of gender groups (males¼55.6% and
61.4% respectively), the German data are dominated by males (87.2%, po0.01). Moreover, the
German respondent is likely to be older (mode X55
years) than the Dutch or US respondents (mode¼
35–44 years, po0.01). Although the household
size in the US (mode¼4) is larger than in Germany
and the Netherlands (mode¼2, po0.01), the respondents’ marital status is fairly consistent across
the three contexts, with the majority being married (478%). Comparisons for education and
income are not straightforward, owing to the
necessity of using country-specific categories. However, middle- to high-income households with
higher education dominate our sample, as may
be expected, based on the sampling design used.
To account for this variability in demographic
characteristics, gender, age, and income were included as control variables.
Measurements
Institutional logics data. Initially, we formulated a
set of 20 items to operationalize the CILMA
construct. Half the items pertained to the logic of
contracts, and the remaining items referred to
relational logic. The master version of the questionnaire was developed in English and translated–
back-translated into Dutch and German, using two
bilingual respondents. In addition, the German
version was translated into Dutch and triangulated
with the Dutch version derived from the English
master version. Discrepancies were discussed, and
jointly resolved for comprehension consistency
by either revising the master version or adapting
the translated version to accurately reflect the
intended meaning. The revised items were pretested using a think-aloud exercise with a sample of
18–30 consumer informants in each country.
Researchers met to discuss pretest results, and
aimed to select items that were robust across
contexts and sufficiently non-overlapping to provide a representative coverage of construct bandwidth. Based on this, a final list of 12 items was
retained (see Table 2).
Firm–consumer relationships data. To capture the
firm–consumer exchange constructs, we relied
mostly on existing scales for transactional satisfaction, firm and frontline employee trust, economic value and consumer commitment.
Most measures were drawn from the marketing
Journal of International Business Studies
12
Journal of International Business Studies
Table 1
Demographic profile of the respondents for the firm–consumer relationships data (all numbers are in percentages)
Gender (%)
Male
Female
Gb
US
NLb
87.2
12.8
55.6
44.4
61.4
38.6
US
NL
7.0
23.0
29.4
40.7
22.7
34.3
24.4
18.6
28.2
30.1
23.0
18.7
High school 1st level
High school 2nd level
Professional education
Some college
College
Graduate school
G
US
NL
32.7
8.7
28.0
—
—
30.6
—
19.3
—
30.5
30.5
19.8
14.4
12.0
27.8
27.3
14.8
3.8
Incomec (%)
Household size (%)
US
NL
No. of people
G
US
NL
81.6
5.8
10.2
2.3
82.7
9.1
6.6
1.6
78.5
14.4
4.3
2.9
1
2
3
4
5
46
10.2
46.4
17.8
17.5
6.4
1.7
7.4
25.5
21.0
26.7
12.8
6.6
16.7
41.1
12.0
20.6
6.7
2.9
o h12,000
h12,001–24,000
h24,001–36,000
h36,001–48,000
h48,001–60,000
h60,001–72,000
h72,001–84,000
4 h84,000
o $35,000
$35,001–54,999
$55,000–74,999
$75,000–94,999
$95,000–114,999
$115,000–134,999
4 $135,000
G
US
NL
5.7
33.3
31.2
13.2
6.9
3.9
2.4
3.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8.3
30.7
25.9
17.6
8.3
2.7
6.6
3.1
39.8
34.0
13.1
6.8
—
—
2.1
—
—
—
—
—
—
—
a
The category labels for education categories were modified for relevance in each cross-national context. For the Dutch data, the categories labels were: (1) mavo/havo/vwo; (2) lbo; (3) mbo;
(4) hbo; (5) universiteit; (6) higher. For the US data, the categories labels were: (1) high school; (2) some college; (3) college; (4) graduate studies; For the German data, the categories labels were:
(1) high school (1 level), (2) high school (2 level), (3) professional education, and (4) university degree.
b
G¼Germany, NL¼the Netherlands, US¼United States.
c
Similarly, because income levels and currencies vary across nations, the category labels were adjusted for relevance for each cross-national data. For the German and Dutch data, net income is used
after tax deduction, whereas for the US data, gross income before tax deduction is employed.
Jagdip Singh et al
G
Consumers’ institutional logics
p34
35–44
45–54
X55
G
Marital status
Married
Single
Divorced/sep.
Widow/widower
Educationa
Age in years (%)
Consumers’ institutional logics
Jagdip Singh et al
13
Table 2
Operational measures and reliabilities of study constructsa
Consumer institutional logics of market actions (CILMA) dimensions
Relational dimension, five-point scale, Strongly disagree–Strongly agree, RelG¼0.93, AVEG¼0.70, HVSG¼0.10, RelUS¼0.95, AVEUS¼0.78,
HVSUS¼0.39, RelNL¼0.92, AVENL¼0.68, HVSNL¼0.35.
Interactions between consumers and insurance companies and agents are generally based on y
Trusting relationships (REL1)
Terms of doing business that are satisfying for both, insurer and customer (REL2)
Working through problems in a mutually satisfying manner (REL3)
Developing a mutual understanding (REL4)
Open and honest relationships (REL5)
Maintaining a long-term working relationship (REL6)
Contracts dimension, five-point scale, Strongly disagree–Strongly agree, RelG¼0.97, AVEG¼0.83, HVSG¼0.07, RelUS¼0.95, AVEUS¼0.76,
HVSUS¼0.22, RelNL¼0.95, AVENL¼0.75, HVSNL¼0.35.
Interactions between consumers and insurance companies and agents are generally based on y
Meeting only the requirements of the policy contract (CON1)
Following written rules of contract even when solving problems (CON2)
Strictly following contract guidelines (CON3)
Contractual details (e.g., fine print) rather than working flexibly to meet customer needs (CON4)
Procedures and practices spelled out in formal agreements (CON5)
Formal requirements set by the rules of the contract (CON6)
Consumer–firm exchange constructs
Satisfaction (R. L. Oliver, 1997), ten-point scale, RelG¼0.96, AVEG¼0.90, HVSG¼0.62, RelUS¼0.96, AVEUS¼0.88, HVSUS¼0.28, RelNL¼0.95,
AVENL¼0.86, HVSNL¼0.64;
Your overall feelings of satisfaction involving the recent interactions with the issuing insurance company:
Highly satisfactory/Highly unsatisfactory (SAT1)
Very pleasant/Very unpleasant (SAT2)
Delightful/Terrible (SAT3)
Frontline employee trust (Morgan & Hunt, 1994), ten-point scale, RelG¼0.96, AVEG¼0.91, HVSG¼0.62, RelUS¼0.98, AVEUS¼0.94,
HVSUS¼0.44, RelNL¼0.96, AVENL¼0.90, HVSNL¼0.57;
I feel that the representatives (e.g., agents/employees) of this company are:
Very dependable/Very undependable (FLE1)
Of very high integrity/Of very low integrity (FLE2)
Very trustworthy/Not at all trustworthy (FLE3)
Firm trust (Morgan & Hunt, 1994), ten-point scale, RelG¼0.97, AVEG¼0.93, HVSG¼0.58, RelUS¼0.99, AVEUS¼0.97, HVSUS¼0.45, RelNL¼0.97,
AVENL¼0.92, HVSNL¼0.45;
I feel that this insurance company’s management practices are:
Very dependable/Very undependable (FIRM1)
Of very high integrity/of very low integrity (FIRM2)
Very trustworthy/Not at all trustworthy (FIRM3)
Economic value (Sirdeshmukh et al., 2002), ten-point scale, RelG¼0.97, AVEG¼0.91, HVSG¼0.46, RelUS¼0.99, AVEUS¼0.96, HVSUS¼0.45,
RelNL¼0.96, AVENL¼0.90, HVSNL¼0.57;
Considering all of the insurance benefits you receive in exchange for the prices (premiums) you pay, how would you rate this company relative to
its competitors?
Very good value/Extremely poor value (VAL1)
Very good deal/Very poor deal (VAL2)
Very worthwhile/Not at all worthwhile (VAL3)
Consumer commitment (Zeithaml et al., 1996), seven-point scale, Very unlikely–Very likely, RelG¼0.91, AVEG¼0.77, HVSG¼0.37, RelUS¼0.87,
AVEUS¼0.75, HVSUS¼0.32, RelNL¼0.89, AVENL¼0.75, HVSNL¼0.19;
How likely are you to:
Use this company for most of your future insurance needs (COM1)
Use this company the next time you need to buy insurance (COM2)
Use this company for other financial services that you may require (COM3)
a
The psychometric properties of constructs are indicated by composite reliability (Rel) and average variance extracted (AVE), as well as by highest
variance shared (HVS), as per Fornell and Larcker (1981).
Journal of International Business Studies
Consumers’ institutional logics
Jagdip Singh et al
14
Establishing validity of CILMA construct and locating markets in CILMA space
Translate–back-translate
Initial set of 20 CILMA items
(10 each for constracts and
relational logics)
Translate–back-translate
Established scales for firmconsumer relationships
Pretestimg
using “think-alouds”
with 18–30 consumers
in United States
Pretestimg
using “think-alouds”
eith 18–30 consumers
in Germany
First- and second-order effects of CILMA on
firm–consumer relationships
Pretestimg
using “think-alouds”
with 18–30 consumers
in Netherlands
Match
samples
Triangulate
Final set of 12 CILMA items
(6 each for contracts and
relational logics)
Collect
institutional
logics data in
Germany
Control for
cultural differences due
to masculinity and
uncertainty avoidance
Collect
institutional logics
data in United
States
Metric and scalar invariance
of CILMA items using
multigroup means and
covariance structure
analysis (MACS)
Match
samples
Collect
institutional
logics data in
Netherlands
Control for
common method bias
and instrument out
differences due to
overall satisfaction
Establish validity and
locational map of Germany,
Netherlands, and United
States in a two dimensional
CILMA space
Collect
relationship data
in Netherlands
Metric and scalar invariance
of relationship construct
items using multigroup
means and covariance
structure analysis (MACS)
Translated–back-translate
Match
samples
Match
samples
Collect
relationship data
In Germany
Triangulate
Translated–back-translate
Collect
relationship data
in United States
Common
method bias
and experience
effects
Gender,
income and
age effects
Test of first-order effects
(H1): Do means of
relationship constructs vary
predictably with institutional
logics?
Test of second order effects
(H2 & H3): Do relationship
mechanisms vary predictably
with institutional logics?
Figure 2 Analytical procedures for establishing validity of CILMA construct, locating markets in CILMA space, and testing first- and
second-order effects of CILMA on firm–consumer relationships.
literature, and evidenced acceptable psychometric
properties (see Table 2). A translation–back-translation procedure and follow-up triangulation were
used for developing a final set of context-robust
operational measures for inclusion in the survey
instrument.
Analytical Approach
Figure 2 displays the overall analytical approach,
which we discuss below.
Institutional logics data. Initially, to test the
psychometric validity of the CILMA construct,
including its dimensions of contractual and relational logics, we use a procedure outlined by
Ployhart and Oswald (2004) for multiple group
mean and covariance structure analysis (MACS).
Journal of International Business Studies
The MACS provides simultaneous estimation of
(see left panel, Figure 2):
(1) factor loadings relating observed indicants and
hypothesized latent factors;
(2) latent factor and indicator means;
(3) constraints on factor loadings to test for measurement equivalence; and
(4) constraints on latent factor means to test for
differences in factor means across groups.
We adapted the MACS procedure as suggested
by Podsakoff, MacKenzie, Lee, and Podsakoff (2003)
to estimate a common method factor in each
group. Moreover, we examined whether CILMA
dimensions are distinct from cultural dispositions and evaluations. Hence we measured two
of Hofstede’s (1993) cultural dimensions that
were most likely to be relevant for the countries
Consumers’ institutional logics
Jagdip Singh et al
15
considered – masculinity and uncertainty avoidance – and included these as control variables in the
MACS analysis. Whereas the three countries are all
low on power distance, and similarly high on
individualism, Germany is relatively higher in
uncertainty avoidance than the US, and the US
and Germany are relatively more masculine than
the Netherlands.
Finally, we recognize that, despite our best efforts
to select random samples with identical research
designs across contexts, sampled respondents
may differ systematically. To control for this bias
we included respondents’ overall satisfaction with
insurance providers as an instrumental variable,
resulting in the following estimated equations:
Z1j ¼ l1j þ g1;1 c1j þ g1;2 c2j þ g1;3 c3j þ y1j
ð1Þ
Z2j ¼ l2j þ g2;1 c2j þ g2;2 c2j þ g2;3 c3j þ y2j
ð2Þ
Here, Z1 and Z2 correspond to latent constructs for
relational and contracts logics, respectively; l
represents the latent factor means; c1 refers to
overall satisfaction; c2 and c3 represent the cultural
dimensions of masculinity and uncertainty avoidance; and the subscript j indexes the market
context (1¼Germany, 2¼US, 3¼the Netherlands).
We selected Germany as the baseline group, constraining its latent means for both dimensions (i.e.,
Z11 and Z21) to 0. Finally, the results of the analyses
were plotted in a two-dimensional space of relational and contracts logics to facilitate interpretation and testing of first- and second-order effects (to
be discussed).
Firm–consumer relationships data. Initially, we used
the MACS approach to estimate the latent means
for the exchange constructs and test for differences
in latent means across CILMAs (see right panel,
Figure 2). To test for the first-order hypothesis,
we employed the LM test for multiple-group comparisons involving latent mean differences for the
Netherlands and US relative to the German data.
For this purpose, we used the multiple-group
structural equation modeling (SEM) procedure
outlined by Card and Little (2006), which explicitly addresses metric and scalar equivalence issues.
To control for other confounding effects and
alternative explanations, we included:
(1) common method factor, as noted above;
(2) consumer experience (i.e., number of contacts
with the provider in the last 24 months); and
(3) individual consumers’ gender, age, and income,
as samples differ on these demographic characteristics (see Figure 2).
For testing the second-order effects, we utilized a
two-step single-indicant approach by Ping (1995),
which controls for measurement error in curvilinear terms, and involved estimating the following
equation:
pj ¼kj þ B1 x1j þ B2 x2j þ B3 x3j þ B4 x4j þ B5 x1j x1j
þ B6 x2j x2j þ B7 x3j x3j þ B8 x5j þ B9 x6j
þ B10 x7j þ B11 x8j þ zj
ð3Þ
where p is consumer commitment construct, and
the vector n represents the exogenous variables
such that x1 to x4 correspond to satisfaction, firm
trust, frontline employee trust, and economic
value, respectively, and their corresponding quadratic terms are represented by product expressions
(e.g., x1 x1). In addition, x5 refers to the level of
consumer–firm interaction, while x6, x7 and x8
represent gender, age and income, respectively,
which are included to control for individual
characteristics.
We analyzed all three markets in a single,
simultaneous analysis. For this purpose, we estimated factor scores for each construct, and used
multiple group comparisons to identify patterns of
similarities and differences in estimated effects
across markets. If the respective test for such
comparison was significant, we released the constraint, and tested for bivariate equality. Separate
estimates were obtained for corresponding coefficients only if all tests were significant.
RESULTS
Institutional Logics Data
Overall psychometrics and model fits. Tables 3 and 4
summarize the results from the MACS analysis.
Regardless of the model estimated, the CILMA
items depict sound psychometric properties (see
Table 4). All items load significantly (40.4,
po0.05) on their corresponding contracts or
relational factors, which, in combination with
small residuals (SRMR¼0.01), provide evidence of
convergent validity. Table 4 also reports the average
variance extracted (AVE) and highest variance
shared (HVS), based on the final model (Fornell &
Larcker, 1981). The AVE are estimated at 0.70
(Germany), 0.78 (US), and 0.68 (the Netherlands)
Journal of International Business Studies
Consumers’ institutional logics
Jagdip Singh et al
16
Table 3
Model fit statistics and latent mean total effects estimates from MACS analysis of CILMA data
Model estimated: Constraints used
Model fit statistics
w
2
df
2
Dw (Ddf)
M1: fully unconstrained
924.9*** 615
—
M2: loadings fully constrained
970.0*** 647 45.1w (32)
M3: intercepts fully constrained
1094.2*** 693 124.2*** (46)
M3a: intercepts partially constrained
976.5*** 674
6.5 (27)
M4: latent means fully constrained
1031.9*** 684 55.4*** (7)
M4a: latent means partially constraineda 954.4*** 673 29.5 (58)
p-value for Dw2
—
0.06
o0.01
0.99
o0.01
0.99
CFI
NFI
TLI
0.99
0.99
0.99
0.99
0.99
0.99
0.98
0.98
0.98
0.98
0.98
0.98
0.99
0.99
0.99
0.99
0.99
0.99
RMSEA (90% CI)
0.032
0.032
0.034
0.030
0.032
0.029
(0.028;
(0.028;
(0.030;
(0.026;
(0.028;
(0.025;
0.036)
0.036)
0.038)
0.034)
0.036)
0.033)
a
Some loadings gave significant LM tests upon introduction of scalar constraints, which led to differences in degrees of freedom.
Significant at the 10% level; ***significant at the 0.1% level.
w
Table 4 Fit statistics, factor loadings, measurement properties and interfactor correlations of CILMA dimensions across contexts from
partially constrained multi-group confirmatory factor analysis
Itemsa
Germany (high contract,
low relational)
lb
Relations
1. REL1
2. REL2
3. REL3
4. REL4
5. REL5
6. REL6
1.00
0.92***
1.05***
1.10***
1.06***
0.86***
Int.c
Rel.d AVE e HVS f
US (intermediate contract,
high relational)
lb
0.00g 0.93 0.70 0.10
0.46***
1.00
0.49***
0.92***
0.52***
1.05***
0.45***
1.10***
0.53***
1.27***
0.37***
0.86***
Int.c
Rel.d AVE e HVS f
The Netherlands
(low contract,
high relational)
lb
0.85*** 0.95 0.78 0.39
0.46***
1.00
0.20*
0.92***
0.52***
1.05***
0.45***
0.89***
0.75***
1.06***
0.37***
0.73***
Int.c
Rel.d AVE e HVS f
0.77*** 0.92 0.68 0.35
0.46***
0.49***
0.39***
0.45***
0.35***
0.37***
0.00g 0.97 0.83 0.07
0.64*** 0.95 0.76 0.22
0.81*** 0.95 0.75 0.35
0.47***
1.00
0.47***
1.00
0.30***
0.45***
1.08*** 0.45***
1.08*** 0.45***
0.45***
1.01*** 0.45***
1.17*** 0.45***
0.38***
0.90*** 0.38***
1.13*** 0.57***
0.49***
1.18*** 0.49***
1.18*** 0.49***
0.44***
1.18*** 0.62***
1.18*** 0.44***
Contracts
1. CON1
2. CON2
3. CON3
4. CON4
5. CON5
6. CON6
1.00
1.08***
1.17***
1.13***
1.18***
1.18***
Masculinity
1. MASC1
2. MASC3
0.00g 0.80 0.67 0.07
0.92*** 0.81 0.67 0.39
0.54*** 0.80 0.67 0.06
1.00
0.40***
1.00
0.40***
1.00
0.40***
1.06*** 0.42***
1.06*** 0.42***
1.06*** 0.42***
Uncertainty avoid.
1. UA1
1.00
2. UA3
0.55***
0.00g 0.64 0.59 0.16
0.31*** 0.79 0.65 0.14
0.60*** 0.58 0.53 0.16
0.27**
1.00
0.27**
1.00
0.27**
0.31***
1.11*** 0.16*
0.55*** 0.31***
Model fit statistics: w2(673)¼954.5 (po0.001); CFI¼0.99; NFI¼0.98; TFI¼0.99; SRMR¼0.05; RMSEA (90% confidence interval)¼0.03 (0.025–0.033).
a
Complete text of item statements is in Table 2.
b
Loading estimate (t-value); all significant at p¼0.01.
c
Intercept estimate for item level/latent mean estimate for construct level.
d
Estimated composite reliability (Fornell & Larcker, 1981).
e
Average variance extracted (Fornell & Larcker, 1981).
f
Highest variance shared (Fornell & Larcker, 1981).
g
Latent means for Germany have been constrained to 0 (baseline group).
Italic loadings non-invariant across contexts.
*significant at the 5% level; **significant at the 1% level; ***significant at the 0.1% level.
for relational logics, and 0.83 (Germany), 0.76 (US),
and 0.75 (the Netherlands) for contracts logics.
Without exception, each construct extracts
significantly more variance from its own items
Journal of International Business Studies
than it shares with any other construct. This
provides support for discriminant validity.
Specifically, the estimated correlations between
the dimensions of contracts and relational logics
Consumers’ institutional logics
Jagdip Singh et al
17
are estimated as 0.32 (Germany), 0.62 (US), and
0.59 (the Netherlands), suggesting less than 35%
shared variance. The preceding convergent and
discriminant
validity
evidence
is
largely
unperturbed across the different models estimated
and reported in Table 3.
Next, as reported in Table 3, we tested for metric
and scalar invariance before testing differences in
latent means (Card & Little, 2006; Steenkamp &
Baumgartner, 1998). The condition for metric
invariance is met, since constraining all loadings
to equal across the three market contexts yields
a non-significant change in w2 (M2: w2diff¼45.1,
dfdiff¼32, p¼0.06). However, the scalar invariance
condition is not met, since constraining corresponding observed means to equal across contexts
results in a significant increase in w2 (M3: w2diff¼
124.2, dfdiff¼46, po0.01). To test for partial scalar
invariance, we released some constraints in accord
with Steenkamp and Baumgartner (1998: 81) to
obtain a non-significant increase in w2 over M2
(M3a: w2diff¼6.5, dfdiff¼27, p¼0.99).
To examine whether the latent means for CILMA
construct vary across market contexts, we compared a fully constrained model (M4) with a model
that meets metric and scalar (partial) invariance condition (M3a). This comparison yields a
significant w2, indicating that the latent means
differ substantially (w2diff¼55.4, dfdiff¼7, po0.01).
We released constraints based on Lagrange multiplier (LM) test to obtain a final model that is
equivalent to model M3a (M4a: w2diff¼29.5, dfdiff¼
58, p¼0.99) and fits the data well (w2df¼673¼954.4,
TLI¼0.99, CFI¼0.99, RMSEA¼0.029 (90% CI: 0.025,
0.033)). We use this final model for latent means
comparisons of CILMA dimensions.
Latent mean comparisons (see Table 4). First, note
that in regard to the relational dimension, the
latent means in the US (0.85) and the Netherlands
(0.77) are significantly higher than the German
latent mean set as the baseline (po0.01). Second,
in regard to the contracts dimension, the latent
means for the US (0.64) and the Netherlands
(0.81) are significantly lower than the German
latent mean set as the baseline (po0.01). Third,
the latent means differ for the Netherlands
and US as well, such that the US is significantly higher than the Netherlands on both the
relational and contracts dimensions (po0.05), with
the German latent mean set as the baseline. The
preceding locational patterns for market contexts appear to confirm and refine our secondarydata-based analysis.
As displayed in Figure 3, the insurance markets
of Germany and the US/Netherlands are cognized
by consumers to lie diametrically opposite in the
contracts–relational logics space, with Germany’s
institutional field dominated by contracts logic
whereas the US/Netherlands is dominated by relational logic. Moreover, the Dutch market context
is positioned lower in the quadrant from the US
(distance¼0.19), indicating that it has significantly less contract focus, although both markets
are equally distant from Germany (distance¼1.12
Contract
0.8
0.6
0.4
0.2
Germany
0
d 2G,US = 1.06
-0.2
Relational
-0.2
-0.1
0.0
0.1
0.2
0.3
-0.4
0.4
-0.6
0.5
0.6
0.7
0.8
0.9
1.0
U.S
d 2G,NL=1.12
d
-0.8
2
=0.19
US,NL
Netherlands
-1
Figure 3 Locational map of consumers’ institutional field of Germany, the US and the Netherlands in a CILMA space defined by
contracts-relational dimensions. The ‘‘markets’’ are plotted based on latent means of CILMA dimensions after ensuring metric and
(partial) scalar invariance. The d2 values reported are Euclidean distances between markets based on their locational coordinates.
Journal of International Business Studies
Consumers’ institutional logics
Jagdip Singh et al
18
Table 5 Fit statistics, factor loadings, measurement properties and interfactor correlations of firm–consumer exchange data under
varying CILMA
Itemsa
Germany (high contract,
low relational)
US (intermediate contract,
high relational)
The Netherlands (low contract,
high relational)
lb
Int.c
Rel.d
AVE e
HVS f
Int.c
Rel.d
AVE e
HVS f
Int.c
Rel.d
AVE e
HVS f
Satisfaction
1. SAT1
2. SAT2
3. SAT3
0.96
0.88
0.71
0.24***
0.05
0.04
0.04
0.95
0.86
0.42
0.15***
0.05
0.04
0.04
0.97
0.92
0.55
0.96***
1.00
0.90***
0.00g
0.05
0.04
0.04
FLE Trust
4. FLE1
5. FLE2
6. FLE3
0.00g
0.02
0.04
0.03
0.97
0.91
0.71
0.21***
0.02
0.04
0.03
0.98
0.95
0.56
0.06w
0.02
0.04
0.03
0.98
0.95
0.44
1.00
1.02***
1.02***
0.98
0.93
0.69
0.13*
0.11w
0.13*
0.11w
0.99
0.96
0.59
0.11*
0.11w
0.13*
0.11w
0.98
0.95
0.55
1.00
1.01***
1.02***
0.00g
0.11w
0.13*
0.11w
Value
1. VAL1
1. VAL2
2. VAL3
0.97
0.92
0.56
0.14**
0.09w
0.10w
0.10w
0.98
0.95
0.59
0.11*
0.09w
0.10w
0.10w
0.98
0.94
0.50
1.00
1.02***
1.00***
0.00g
0.09w
0.10w
0.10w
Commitment
1. COM1
1. COM2
2. COM3
0.00g
0.02
0.01
0.02
0.92
0.80
0.52
0.21***
0.02
0.01
0.02
0.90
0.76
0.54
0.12*
0.02
0.01
0.02
0.90
0.76
0.23
0.98***
1.00
0.67***
Firm Trust
1. FIRM1
2. FIRM2
3. FIRM3
w2(625)¼1184.3 (po0.001); CFI¼0.99; NFI¼0.98; NNFI¼0.99; SRMR¼0.04; RMSEA (90% confidence interval)¼0.03 (0.032–0.038).
a
Complete item text can be found in Table 2.
b
Loading estimate common to all countries.
c
Intercept for item level/latent mean for construct level.
d
Estimated composite reliability (Fornell & Larcker, 1981).
e
Average variance extracted (Fornell & Larcker, 1981).
f
Highest variance shared (Fornell & Larcker, 1981).
g
Latent means for Germany constrained to 0 (baseline group).
All coefficients and intercepts are statistically significant (po0.05).
w
Significant at the 10% level; *significant at the 5% level; **significant at the 1% level; ***significant at the 0.1% level.
and 1.06, respectively). For this reason, the US
institutional market context is identified in Table 4
as reflecting ‘‘intermediate’’ focus on contracts,
whereas the Netherlands is identified as relatively
‘‘low’’ focus on contracts. Both institutional market contexts are noted as relatively high on relational logics.
Test of Hypotheses Using Firm–consumer
Relationships Data
Overall fit. Consistent with the approach outlined
by Card and Little (2006), we estimated a multigroup model of customer commitment (as per
Figure 1) that included constraints for metric and
Journal of International Business Studies
scalar invariance. For large sample sizes, Card and
Little (2006: 79) note that the MACS approach ‘‘is
likely to indicate measurement inequalities across
cultures even in the presence of substantively trivial
differences.’’ To mitigate this, they recommend
estimating directly a model that includes constraints for metric and scalar invariance. Card and
Little (2006: 79) suggest that if such model
‘‘exhibits adequate fit as indexed by common fit
indexes, then equality of measurement (i.e.,
measurement invariance) across the cultures can
be concluded.’’ In our study, this constrained
model showed an acceptable fit (w2df¼625¼1184.3,
NFI¼0.98, NNFI¼0.99, CFI¼0.99, SRMR¼0.04,
RMSEA¼0.03 (90% CI: 0.032, 0.038)) with fit
Consumers’ institutional logics
Jagdip Singh et al
19
Table 6
k
x1
x2
x3
x4
x1 x1
x2 x2
x3 x3
x5
x6
x7
x8
Estimated structural coefficients for firm–consumer exchange mechanisms under varying CILMA
Intercept
Satisfaction
Firm trust
FLE trust
Economic value
Satisfaction2
Firm trust2
FLE trust2
Contact frequency
Gender
Age
Income
Germany (high contract,
low relational)
US (intermediate contract,
high relational)
The Netherlands (low contract,
high relational)
Ba
Ba
Ba
0.08w
0.21***
0.24***
0.18***
0.19***
0.01
0.04
0.00
0.03
0.02
0.00
0.07**
0.21***
0.08
0.24***
0.18***
0.19***
0.01
0.04
0.07
0.03
0.02
0.00
0.07**
0.12*
0.21***
0.24***
0.18***
0.01
0.28*
0.04
0.31*
0.03
0.02
0.00
0.07**
Model fit statistics: w2(20)¼9.1 (p¼0.98); CFI¼1.00; NFI¼0.99; NNFI¼1.00; SRMR¼0.01.
a
Estimated loading coefficient.
Italicized estimates significantly variant across contexts at po0.05.
w
Significant at the 10% level; *significant at the 5% level; **significant at the 1% level; ***significant at the 0.1% level.
indices meeting all relevant criteria (see Table 5).
Moreover, each study construct has estimated
reliabilities exceeding 0.85, and an AVE greater
than 0.75, indicating acceptable convergent validity. Finally, as summarized in Table 5, each construct meets Fornell and Larcker’s (1981) criterion
for discriminant validity (AVE4HVS). Overall,
the constructs indicate acceptable psychometric
properties.
First-order effects (Hypothesis 1). The results are
summarized in Table 6. As per Hypothesis 1, we
had predicted that relational-dominated contexts would be associated with higher trust and
commitment (Hypothesis 1b), while contractsdominated contexts will evidence higher levels
of satisfaction (Hypothesis 1a). Relative to the
German context, the estimated latent mean for
satisfaction is significantly higher in the US context
(0.24), but lower in the Dutch context (0.15, all
comparisons po0.05). This provides mixed support for Hypothesis 1a. Likewise, the estimated
latent means for commitment and trust (frontline
employee and firm) are significantly higher in the
US context than in the German context (0.21, 0.21
and 0.13, all po0.05). The preceding pattern of
latent means is not obtained for the Netherlands,
where the estimated latent means are generally
lower than in Germany (0.12 (po0.1), 0.06 (ns),
and 0.11 (po0.05)). Thus our findings provide
partial support for Hypothesis 1b.
Second-order effects (Hypotheses 2 and 3). We predicted that the effect of social trust on commitment
would be stronger for relational-dominated contexts (Hypothesis 2a), while the effect of satisfaction would be stronger for the contract-dominated
context (Hypothesis 2b). As per Hypothesis 2a,
Table 6 shows that frontline employee trust has
a significant ‘‘motivator’’ effect on consumer commitment in the Netherlands (B¼0.18 and 0.31
for linear and quadratic terms respectively) but
not in the German context (B¼0.18 and 0.00
respectively). Likewise, firm trust has a stronger
effect on commitment in the Netherlands (B¼0.24
and 0.14 for linear and quadratic terms respectively) than in the German context (B¼0.24 and
0.04 for linear and quadratic terms respectively),
although the difference is not statistically significant at p¼0.05. However, the estimated effects
of social trust on commitment do not vary significantly between the German and US contexts.
Overall, Hypothesis 2a is supported for the Dutch
data, but not for the US data.
In accord with Hypothesis 2b, Table 6 shows that
satisfaction has a significantly stronger effect on
consumer commitment in the contracts-dominated
German context (B¼0.21) than in either the
relational-dominated context of US, where the
corresponding effect is non-significant (B¼0.08),
or that of the Netherlands, where the corresponding effect indicates a strong ‘‘hygiene’’ effect
(B¼0.21 and 0.28 for linear and quadratic terms
Journal of International Business Studies
Consumers’ institutional logics
Jagdip Singh et al
20
respectively). Thus support for Hypothesis 2b is
unequivocal.
As per Hypothesis 3, we predicted that the effect
of economic value on consumer commitment
would be significant and invariant across contexts.
This predicted pattern is obtained for the contractsdominated German and relational-dominated US
contexts (B¼0.19, po0.01, for both), but not
for the Dutch data (B¼ 0.01, p40.50). Hence
Hypothesis 3 is partly supported.
Graphing differentiated patterns. Figure 4 displays
the results for Hypothesis 2 to illustrate the
differentiated pattern of effects across institutional
contexts. Note, for instance, that frontline employee (FLE) trust depicts a distinctive ‘‘motivator’’
effect in the relational-dominated Netherlands,
whereas the effect of satisfaction in this context
follows a ‘‘hygiene’’ pattern. Moreover, consumer
commitment is higher in the relational-dominated
Netherlands context than in the contractsdominated German context for nearly all values of
FLE trust (except around the midpoint, where the
values are similar).
For satisfaction, the pattern is completely
reversed. Consumer commitment is higher in
the contracts-dominated German context than
in the relational-dominated Netherlands context
for every value of satisfaction. The pattern for the
NL
d(
min
ate
0.75
0.50
Do
alon
lati
0.00
Re
(N
ed
om
in
at
-0.75
-1.00
l-D
(G)
ated
omin
cts-D
a
tr
n
Co
-1.25
R
-1.50
-0.25
el
at
0.00
-0.50
(G)
inated
-Dom
ts
c
a
tr
Con
na
)
d (U.S
inate
l-Dom
a
n
o
ti
Rela
0.25
-0.25
io
Commitment
0.50
Relational-Dominated (U.S)
0.25
L)
0.75
DISCUSSION AND IMPLICATIONS
Contemporary research within the relationship
marketing literature has tended to focus on the
variability in consumer commitment mechanisms
across diverse markets, largely ignoring the role of
institutional logics in explaining this variability
(Henisz & Swaminathan, 2008). More significantly,
despite frequent calls for the adoption of a consumer perspective in understanding institutional
contexts (Brief & Bazerman, 2003), comparative
international studies focus mainly on consumers’
marketplace attitudes and behaviors, and scarcely
examine their evaluations of institutional environments or their implications for market relationships.
Our study addresses these gaps by bridging
institutional and relationship marketing theories
to provide insights into two questions: (1) Do
consumers hold meaningful mental models of a
market’s institutional logic? (2) Are these mental
1.00
)
1.00
relational-dominated US context presents an
intermediate position. Commitment is higher in
this context than in the contracts-dominated
German context for FLE trust, but the increasing
slope shows a leveling-off effect. Likewise, for
satisfaction, while commitment is higher in the
relational-dominated US context than in the
contracts-dominated German context, the slope
is significantly more positive in the latter context.
-1.75
-2.00
-1.49
-1.19
-0.89
-0.59
-0.29
-0.01
-0.31
-0.61
-0.91
-1.21
-1.51
-1.81
Frontline Employee Trust
Frontline employee trust has a “motivator” effect on consumer
commitment in relational-dominated Netherlands context but
only a linear effect in contracts-dominated German context.
The relational-dominated US context depicts an intermediate
pattern.
Figure 4
-1.99 -1.69 -1.39 -1.09 -0.79 -0.49 -0.19 -0.11 -0.41 -0.71 1.01 1.31 1.61 1.91
Satisfaction
Satisfaction has a “hygeine” effect on consumer commitment in
relational-dominated Netherlands context, while its effect in
contracts-dominated German context in linear and strong. In
relational-dominated US context, satisfaction depicts an
intermediate pattern with weak slope.
Varying effects of trust and satisfaction mechanisms on consumer commitment across the different CILMA.
Journal of International Business Studies
Consumers’ institutional logics
Jagdip Singh et al
21
models useful in explaining differentiated patterns
of ongoing market relationships?
Consumers’ Conceptions of Market’s Institutional
Logics: Representation and Validity
We reasoned that consumers are motivated to
develop and maintain shared mental models of
a market’s institutional field because it helps them
make sense of and cope with market relationships.
We conceptualized these shared mental models to
include generalized norms of exchange practices in
a given industry, and referred to them as CILMA.
Drawing on institutional theory, we proposed two
dimensions to represent CILMA: (1) contracts logic,
defined by the prevalence of contractual obligations consistent with the logics of instrumentalism; and (2) relational logic, characterized by
social codes of conduct consistent with the logic
of appropriateness.
Observing that markets usually require some
minimum level of contracts and relational logics,
we reasoned that nations do not represent monolithic institutional fields to produce homogeneous
market logics across all industries, nor are these
logics static over time. The unique historical and
institutional footprint of a given industry is expected to provide a reasonable foundation for representing consumers’ conceptions of institutional
logics that evidence coherence and are appropriate
for differentiating across markets for any given
industry. Moreover, relative to cultural dualities
(e.g., structured–unstructured in uncertainty avoidance), we theorize that the contract–relational
duality is a unique, lower-order representation of
consumers’ institutional logics, and is more proximal to market relationships.
Our empirical results provide support for these
theoretical assertions. The proposed CILMA construct achieves metric and partial scalar invariance
for its measures in the German, US, and Dutch data
utilized. This suggests that the CILMA items have
cross-national consistency, and are appropriate for
comparative analysis. In addition, we find reasonable evidence of CILMA’s convergent and discriminant validity. The two dimensions share, for
instance, less than 35% of their variance, and significantly less than that with constructs related
to market exchanges (e.g., overall satisfaction) or
cultural dimensions of uncertainty avoidance and
masculinity. Taken together, these results provide
sufficient evidence to suggest that the CILMA
construct has reasonable validity and warrants
consideration in future research.
Moreover, the locational coordinates for the three
markets in the contract–relational space (shown in
Figure 3) indicate that consumers’ conceptions of
institutional logics, as captured by the CILMA
construct, are sufficiently fine grained to differentiate among these markets. Specifically, the German
insurance market is located in the relatively high
contracts – low relational quadrant, whereas the US
and Dutch markets are both located in the
relatively low contracts – high relational quadrant
(see Figure 3), consistent with secondary-data-based
expectations.
Where the secondary data are coarse and equivocal, the proposed CILMA construct allows us to go
further. For instance, although the US and Dutch
insurance markets are both relational-dominated,
important differences between these markets exist.
These differences can be quantified by comparing
their locational coordinates. The location spread
along the contracts dimension (0.81 vs 0.64¼
0.15) is twice as large as the spread along the
relational dimension (0.77 vs 0.85¼0.08) for the
Dutch and US markets, suggesting that consumers
conceive the Dutch insurance market to be proportionately less focused on contracts relative to
relational logics.
As we discuss below, this distinction is useful
in understanding the differential results obtained
for CILMA’s influence on relationship marketing
mechanisms. Nevertheless, these insights prompt
the study of cultural, historical, and institutional
processes that influence and shape consumers’
mental models of institutional logics.
Differentiated Pattern of Relationship Marketing
Mechanisms across Markets: From Description to
Explanation
While past research provides compelling evidence
of significant cross-market variability in relationship marketing mechanisms (e.g., Wulf et al.,
2001), a descriptive rather than an explanatory
view of differentiated patterns prevails in most
studies to date. We therefore have largely robust
observational evidence of cross-market variability,
but weak explanations beyond post-hoc assertions.
Our study moves the research forward by developing theoretical explanations that bridge the
relationship marketing and institutional perspectives. Specifically, the bridging hypotheses involve
predictions of first- and second-order effects of
consumers’ conceptions of institutional logics,
represented by the CILMA construct, in explaining
cross-market variability in relationship marketing
Journal of International Business Studies
Consumers’ institutional logics
Jagdip Singh et al
22
mechanisms. We reasoned that consumers recognize and reward firms that invest resources in
relationship mechanisms that are aligned with
their mental model of the market’s institutional
logics. Our results generally support this line
of reasoning, although some results raise new
questions.
Specifically, as displayed in Figure 4, frontline
employee trust has a ‘‘motivator’’ effect on consumer commitment in the relational-dominated
Dutch market (high relational, low contracts: see
Table 4), while the corresponding effect is linear
and weaker for the contracts-dominated German
market (low relational, high contract: see Table 4).
Consistent with this, consumers exhibit higher
levels of commitment in the relational-dominated
Dutch market than in the contracts-dominated
German market for every value of frontline employee trust. This conforms to our anticipation that
trust mechanisms will evidence increased salience
in markets characterized by relational logics, and
suggests that trust investments in contracts-dominated logics are less effective.
Likewise, the satisfaction mechanism depicts a
pattern of effects that is in direct contrast to the
preceding pattern for employee trust mechanism,
as anticipated by our hypothesis. The influence of
satisfaction on commitment in a relational-dominated Dutch market is akin to a ‘‘hygiene’’ effect,
while the corresponding effect in the contractsdominated German market is linear and strong.
Moreover, the contracts-dominated market is associated with higher values of consumer commitment
than the relational-dominated Dutch market for
every value of satisfaction. This provides further
support of our alignment-based reasoning.
As noted above, consumers in our study perceived
the US market as relatively more contractually
focused than the Dutch market, while both are
relational-dominated. The pattern of consumer
commitment mechanisms for the US market sheds
several additional insights into the bridging of
institutional and relationship marketing perspectives (see Figure 4).
First, note that the level of consumer commitment is higher in the US market than in either
the German or the Dutch market. This suggests
that, at least based on our data, mixed institutional
systems that combine relational and contract
logics are more conducive to consumer commitment than relatively ‘‘monistic’’ markets such as
the relational-dominated Dutch and contractsdominated German markets.
Journal of International Business Studies
Second, the commitment mechanisms reflect the
intermediate patterns consistent with the CILMA
locational coordinates of the US market. Frontline
employee trust has a more positive but exponentially decreasing slope relative to the German
market, but lacks the motivator effect of the Dutch
market. Likewise, the influence of satisfaction on
commitment is linear but weaker than the corresponding effect in the German market, but lacking
the hygiene pattern of the Dutch market.
Finally, the effect of value on commitment is
robust and equivalent to the corresponding effect
in the German market. For the relational-dominated Dutch market the value mechanism is
surprisingly non-significant, suggesting that this
context is strongly inclined toward the dominance
of trust mechanism. Yet the relatively low latent
mean estimates of trust in the Dutch market raise
new questions. A possible explanation is that the
influence of trust mechanisms is heightened when
relational risk is high because of low levels of
contracts. The increased relational risk could render
the economic value mechanism moot, explaining
the low mean of perceived economic value in the
Dutch context. Additional research to explore these
explanations is warranted.
The insight from the institutional explanation
of differentiated exchange patterns across international markets lies in its potential to anticipate
the preceding pattern of relationship marketing
mechanisms, which varies systematically from the
contracts-dominated German to the relationaldominated Dutch context, with an intermediate
pattern for the US market. Thus our study parallels
recent work that bridges the institutional and
resource-based theories (C. Oliver, 1997), and
broadens the possibilities by including the consumer perspective to bridge into relationship
marketing theory.
Managerial Implications
Managers operating in international markets are
well aware that successful navigation of global
markets requires strategies that adapt flexibly to
local markets while also capitalizing on global
similarities. Studies of cultural, environmental,
demographic and geopolitical differences across
nations are motivated, in part, by providing
managers with navigational guides. Complementing the broad and abstract assertions of this work,
our study advances an institutional-theory-based
approach for differentiating industry-markets that
emphasizes consumers’ perspective. As a result, it
Consumers’ institutional logics
Jagdip Singh et al
23
offers guidelines that are more concrete and finegrained.
Based on our theorizing and results, we recommend that managers comprehend, measure, and
track consumers’ institutional logics for the industry-markets they serve, and understand their strategic implications. To facilitate this, we provide
a validated CILMA construct that managers can
deploy, with minor refinements. This construct
facilitates mapping of consumers’ mental models
in a two-dimensional institutional logics space
for comparative analyses of global markets, and
tracking its changes over time as markets converge
or diverge owing to local and global forces of
change.
Our study also demonstrates that an understanding of consumers’ institutional logics offers
concrete managerial guidelines for investing in
relationship capabilities in order to gain consumer
commitment. Our results suggest that consumer
commitment conforms to a principle of alignment,
such that payoffs from a firm’s investments are
contingent on its alignment with consumers’
mental models of the market’s institutional logics.
Only investments in value delivery capabilities
are universally rewarded and remain unaltered
by consumers’ different institutional logics. Thus
we recommend that international managers include
CILMA considerations in formulating strategies
to pinpoint levers of relationship capabilities that
are appropriate for market differentiation (e.g.,
alignment) while identifying others that may be
globalized (e.g., value).
Study Limitations and Future Research
Several limitations warrant consideration, and
provide opportunities for future research. First, we
recognize the usual limitations of a cross-sectional
design, despite the use of two separate samples to
control for possible confounding between institutional logics and firm–consumer relationships
data. It is appropriate to triangulate our findings
with alternative within-subject designs, such as a
longitudinal design. Second, to the extent that the
cross-national samples are not completely equivalent, we cannot rule out the confounding effects of
sampling differences, although we include gender,
age, and income as control variables to mitigate
these effects. Third, studies in other markets and
economies are useful for investigating the generalizability of the proposed CILMA dimensions. A
systematic program can yield a representation of
global markets in a CILMA locational space, making
it easier to select markets and economies with
similar or contrasting CILMAs, and thereby facilitating future theoretical work and managerial use.
Fourth, although we included uncertainty avoidance and masculinity for robustness and discriminant validity analyses, more elaborate cultural
controls need to be examined, and possible interactions between cultural and institutional logic
constructs explored. In addition, we relied on two
dimensions for capturing consumers’ institutional
logics. Although the CILMA construct shows sound
psychometric properties, further refinements or
extensions to include additional dimensions may
be considered. Fifth, future research may explore
the nature and evolution of a market’s institutional
logics in relation to network theory ideas embodied
in the service-dominant logic (SDL; Vargo & Lusch,
2004). This broadening brings SDL thinking closer
to institutional theory, and useful connections
might be derived. Finally, it remains unclear
whether globalization will reinforce or erase differentiated patterns of institutional logics across
international markets. This lack of clarity begs
additional research.
CONCLUDING NOTES
Our study is an encouraging starting point for
understanding consumers’ conceptions of markets’
institutional logics, and their influence in explaining variability in differentiated patterns of relationship marketing mechanisms across international
contexts. This line of research does not diminish
the role of managerial agency, just as it does
not presume a deterministic view of institutional
influence. Rather, our study provides a foundation for a mid-range theory, bridging institutional
and relationship marketing theories to facilitate
systematic empirical examination of their interrelationships, as advocated by Iyer (1997) and
reiterated in the institutional literature (Henisz &
Swaminathan, 2008). In this theory, institutional
logics amplify or diminish the influence of managerial agency in gaining consumer commitment, and
this effect is nontrivial. We hope that our work will
provide an impetus for additions and extensions
that bridge institutional and relationship marketing
literatures and emphasize consumers’ perspective in
explaining differences in firm–consumer exchange
mechanisms across international contexts.
ACKNOWLEDGEMENTS
The authors thank Deepak Sirdeshmukh for his
assistance in data collection in the United States,
Journal of International Business Studies
Consumers’ institutional logics
Jagdip Singh et al
24
and thoughtful contribution to the development of
ideas at the formative stages of this paper. Financial
support for data collection in the United States was
provided by a research grant from the Weatherhead
School of Management, Case Western Reserve
University. Financial support for data collection in
Germany was provided by a grant from the German
Research Foundation (DFG grant no. HO 2224/1-1).
The authors appreciate Hartmut Holzmüller’s assistance in arranging the DFG grant, and for input in the
initial stages. The paper benefitted from the constructive comments of the reviewers and the thoughtful
guidance of the Area Editor during the review process,
which is sincerely acknowledged.
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secondary data were collected to ensure adequate
variation along the two consumers’ institutional
logics of market action (CILMA) dimensions.
Focused on auto and home insurance, and using
the Internet among others, we first identified
contracts/policies for auto and home insurance in
the US, the Netherlands, and Germany, and
compared their level of detail using contract length
as a proxy for the importance of contracts in market
exchanges (Faems, Janssens, Madhok, & van Looy,
2008).
As Table A1 shows, we found that German
contracts are the most lengthy and Dutch contracts
the shortest. The US holds a middle position.
This confirms the variation for the countries
selected along the dimension of formal contract.
The difference in length of contract in Germany
and the Netherlands, and Germany and the US, is
provided to support our interpretation. Moreover,
the results for auto and home insurance mimic the
results from our empirical data on consumer
perceptions of contracts dimension.
Second, for the relational-logics dimension we
researched the types of advice given to consumers
by federal agencies and independent consumerreport-like agents for selecting and dealing with
insurance providers. The objective was to learn
more about the nature and type of advice provided
(e.g., price/content, relational). In addition to
federal and consumer society sites, we studied
commercial sites offering product and provider
comparisons.
The results show that major state insurance
regulators in the US provide detailed guidance to
consumers on how to deal with insurance providers
(Erhemjamts & Leverty, 2007). Dutch and German
federal agencies provide only general advice, and
refrain from detailed suggestions (Menhart, Pyka,
Ebersberger, & Hanusch, 2003; Vletter-van Dort,
2006). Notable are US federal agents’ suggestions
to consumers to look beyond price when dealing
with a provider (e.g., consider also company
reputation, positive word of mouth, etc.). Consider
for instance the following excerpt from a shopper’s
guide developed by the State of Ohio in the US
(http://www.insurance.ohio.gov/Consumer/OCS/
CompleteGuides/CompleteHomeGuide.pdf):
APPENDIX
Wise shoppers look for more than price y The process of
choosing a proper policy for your home must take into
account many important factors. The policy offered at the
lowest cost may not offer the level of insurance protection
you need. If you have been satisfied with your company’s
service in the past, it may not be wise to jump to an unknown
Secondary Data Analysis of Insurance Markets
After the identification of German, US, and Dutch
insurance markets as targets of study, additional
Journal of International Business Studies
Consumers’ institutional logics
Jagdip Singh et al
26
Table A1
Comparison of insurance contracts in Germany, the US and the Netherlands, based on page length
Country
Auto insurance contract (no. of pages)
Home insurance contract (no. of pages)
Ga
US
NLa
DUS-G
DNL-G
20
14
6 (slightly smaller margins)
6 (¼30% less in US than in G)
14 (¼70% less in NL than in G)
16
13
11
3 (¼19% less in US than in G)
5 (¼30% less in NL than in G)
a
G¼Germany, NL¼the Netherlands.
company to save a few dollars. If you have not been satisfied
with your company, or if you are shopping for the first time,
ask friends and relatives for references about the service they
have received from companies they have used.
(p. 10)
The German federal agency Bundesanstalt für
Finanzdienstleistungsaufsicht (BaFin) does provide
consumers with information but only at a very
general level (see http://www.bafin.de/cln_116/
nn_723254/DE/Verbraucher/FAQVerbraucher/Versich
erungen/versicherungen__node.html?__nnn¼true).
In the Netherlands, Autoriteit Financiële Markten
(AFM) provides information for consumers (http://
consument.afm.nl/consumenten/producten/verze
kering/hoe.aspx), and has recently opened a new
Internet site Consuwijzer (http://www.consuwijzer
.nl/Ik_wil_advies_over/Geld_en_verzekeringen/Ver
zekeren). However, the level of information is still
basic, and thus extremely limited.
Independent consumer agencies in all three
countries do provide consumers with detailed,
additional information. For our secondary data
research we focused on agencies that require membership status. In the US, the Consumer Reports
offers extensive comparisons and advice for
selecting insurance (www.ConsumerReports.org).
Suggestions that can be found include, for instance,
to ‘‘call your state insurance departments to get
a measure of complaints about the carriers you’re
considering’’ and ‘‘Stick with a company that
treats you well y loyalty seems to count’’ (re auto
insurance). In Germany, Stiftung Warentest (http://
www.test.de/themen/versicherung-vorsorge/) provides independent information and test results
for many different sorts of products and services.
The organization provides advice to consumers, such as what to do in order to obtain the
cheapest insurance, and points out alternatives for
consumers who want to change insurance providers. Several studies are available (e.g., auto insurance, home insurance, and personal valuables)
comparing price and content of the offers set
forward. Relational advice is limited. A similar
Journal of International Business Studies
independent consumer organization also exists in
the Netherlands: Consumentenbond (http://www
.consumentenbond.nl/). Like their German counterpart they focus on price/content comparison,
and provide suggestions for switching providers.
Their range of studies pertaining to insurance is
limited.
ABOUT THE AUTHORS
Jagdip Singh (jagdip.singh@case.edu) is H. Clark
Ford Professor of Marketing at Weatherhead School
of Management, Case Western Reserve University,
US, and holds a PhD in Marketing from Texas Tech
University. His international program of research
examines effective and enduring connections
between organizations and their customers, especially in service industries. He also studies how
firms organize and implement change and knowledge management to balance the competing goals
of productivity and quality in the frontlines. Jagdip
received the ‘‘Excellence in Reviewing’’ awards from
several journals, and has published in journals such
as Journal of Marketing, Academy of Management
Journal, Academy of Management Review, Journal of
Marketing Research, Management Science, and Journal
of International Business Studies.
Patrick Lentz (patrick.lentz@udo.edu) is a postdoctoral research fellow in the Department of
Marketing, TU Dortmund, Germany, and CEO of
the Institute of Efficient Marketing (IFEM) in
Bielefeld, Germany. His research interests focus on
methodological issues in marketing research as well
as customer relationship management and service
marketing. He has published in the Journal of
Business Ethics, Advances in International Marketing
and DBW – Die Betriebswirtschaft.
Edwin J Nijssen (e.j.nijssen@tue.nl) is a professor
of Marketing at the Innovation, Technology Entrepreneurship and Marketing group of the School
Consumers’ institutional logics
Jagdip Singh et al
27
of Industrial Engineering, Eindhoven University
of Technology, and holds a PhD from Tilburg
University. His research interest focuses on new
product development, relationship marketing, and
international marketing. He has published in, for
instance, the Journal of the Academy of Marketing
Science, International Journal of Research in Marketing,
and Journal of Product Innovation Management.
Accepted by Daniel Bello, Area Editor, 3 September 2009. This paper has been with the authors for three revisions.
Journal of International Business Studies